Debunking Some Internet Myths- Part 2

Myths and misstatements of fact frequently circulate on the Internet,
in email and on websites, and are repeated in endless loops of misinformation.
One common set of such misinformation involves a series of questions about
the history of the Social Security system.

One Common Form of the Questions:

Q1: Which political party took Social Security from the independent
trust fund and put it into the general fund so that Congress could
spend it?

Q2: Which political party eliminated the income tax deduction for
Social Security (FICA) withholding?

Q3: Which political party started taxing Social Security annuities?

Q4: Which political party increased the taxes on Social Security
annuities?

Q5: Which political party decided to start giving annuity payments
to immigrants?

THE CORRECT ANSWERS TO THE FIVE QUESTIONS
Q1. Which political party took Social Security from the independent trust
fund and put it into the general fund so that Congress could spend it?

A1: There has never been any change in the way the Social
Security program is financed or the way that Social Security payroll taxes
are used by the federal government. The Social Security Trust Fund was
created in 1939 as part of the Amendments enacted in that year. From its
inception, the Trust Fund has always worked the same way. The Social Security
Trust Fund has never been "put into the general fund of the government."

Most likely this question comes from a confusion between the financing
of the Social Security program and the way the Social Security Trust Fund
is treated in federal budget accounting. Starting in 1969 (due to action
by the Johnson Administration in 1968) the transactions to the Trust Fund
were included in what is known as the "unified budget." This
means that every function of the federal government is included in a single
budget. This is sometimes described by saying that the Social Security
Trust Funds are "on-budget." This budget treatment of the Social
Security Trust Fund continued until 1990 when the Trust Funds were again
taken "off-budget." This means only that they are shown as a
separate account in the federal budget. But whether the Trust Funds are
"on-budget" or "off-budget" is primarily a question
of accounting practices--it has no effect on the actual operations of
the Trust Fund itself.

Q2: Which political party eliminated the income tax deduction
for Social Security (FICA) withholding?

A2: There was never any provision of law making the
Social Security taxes paid by employees deductible for income tax purposes.
In fact, the 1935 law expressly forbid this idea, in Section 803 of Title
VIII.

A3. The taxation of Social Security began in 1984 following
passage of a set of Amendments in 1983, which were signed into law by
President Reagan in April 1983. These amendments passed the Congress in
1983 on an overwhelmingly bi-partisan vote.

The basic rule put in place was that up to 50% of Social Security benefits
could be added to taxable income, if the taxpayer's total income exceeded
certain thresholds.

The taxation of benefits was a proposal which came from the Greenspan
Commission appointed by President Reagan and chaired by Alan Greenspan (who went on to later become the Chairman of the Federal Reserve).

Q4.Which political party increased the taxes
on Social Security annuities?

A4. In 1993, legislation was enacted which had the effect
of increasing the tax put in place under the 1983 law. It raised from
50% to 85% the portion of Social Security benefits subject to taxation;
but the increased percentage only applied to "higher income"
beneficiaries. Beneficiaries of modest incomes might still be subject
to the 50% rate, or to no taxation at all, depending on their overall
taxable income.

This change in the tax rate was one provision in a massive Omnibus Budget
Reconciliation Act (OBRA) passed that year. The OBRA 1993 legislation
was deadlocked in the Senate on a tie vote of 50-50 and Vice President
Al Gore cast the deciding vote in favor of passage. President Clinton signed the bill into law on August 10, 1993.

Q5. Which political party decided to start giving annuity payments
to immigrants?

A5. Neither immigrants nor anyone else is able to collect
Social Security benefits without someone paying Social Security payroll
taxes into the system. The conditions under which Social Security benefits
are payable, and to whom, can be found in the pamphlets
available on our website.

The question confuses the Supplemental Security Income (SSI) program
with Social Security. SSI is a federal welfare program and no contributions,
from immigrants or citizens or anyone else, is required for eligibility.
Under certain conditions, immigrants can qualify for SSI benefits. The
SSI program was an initiative of the Nixon Administration and was signed
into law by President Nixon on October 30, 1972.

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